Great Leap Forward


When I was a kid, there was always one response that won any playground argument: “Your mom wears Army boots”. It was the magic trump card that humiliated the opponent and ensured victory.

To be sure, I never quite understood why. Was it because she “wore the boots in the family”? Or because she was overseas, abandoning her offspring while she participated in one of America’s foreign adventures? Neither of those seemed particularly shameful to me at the time, although some years later as a war protestor with a low draft number (52) who appealed the call-to-arms, seeking to obtain a C-O status to avoid fighting in the war against Viet Nam, I would have been horrified to find my mom, or my dad, or my brothers and my sister in Army boots fighting on the other side of justice.

(According to a quick Google search, the explanation is that “poor women used to rob corpses on the battle field and trade sexual favours for items of clothing back around WWI . The taunt goes back to those days. The taunt alluded to poverty and a lack of moral fortitude on the part of the family.” However, I’m pretty sure that none of our schoolyard taunters knew this.)

The opponents of MMT seem to believe that they can use the same schoolyard bully strategy, accusing our mothers of wearing Army boots. The accusations need no evidence, no logic, no argument. They come out of the blue, trump cards used by apparently pre-pubescent bloggers and tweeters to defame MMT–to end discussion not to enlighten it.

A case in point. Here’s an exchange that took place last night.

Matthew Klein: Huh. Dennis Kucinich proposed abolishing private money creation. Who knew?

Dylan Matthews: Am I crazy for thinking that’s not a bad bill at all?

Matthew Klein: It’s basically MMT put into practice. There are plenty of worse ideas.

Dylan Matthews: And yet MMTers hate it! [link to a post by Bill Mitchell}

Matthew Klein: Both criticisms seem to focus on the semantics of the preambles rather than the substance of the legislation.

John Carney: That’s right. They think this is already the case.

Matthew Klein: Which is ironic since Kucinich’s plan contains their beloved job guarantee & puts all money+credit creation at Treasury.

Dylan Matthews: Yeah John’s exactly right. They think they’re right descriptively, not just normatively.

Huh? MMTers hate the Kucinich proposal to abolish private money creation, yet MMTers think that’s already the case? And they believe all money+credit creation is already at the Treasury?

And MMT’s mom wears Army boots, too.

MMT either wants to abolish private money creation, or believes that is already the case? Really?

Warren Mosler is a banker who wants to end private money creation? Full disclosure: he just sold his bank, so technically he’s not a banker any more. He managed his small bank through the crisis, brought it back to profitability, and decided the time was right to sell it. He didn’t sell it because it couldn’t create private money before, or because he advocates ending private money creation now. Warren has supported, and continues to support, private banking. And he—like every other MMTer—knows that money creation is “endogenous”: loans create deposits, and all that. That’s a good thing. If banks could not “create private money”, they wouldn’t be very useful.

Some MMTers, including yours truly and Bill Black, continue to oppose fraud at the world’s biggest banks. We oppose criminal activity by Goldman Sachs, Bank of America, Citigroup, and so on. We do not oppose “private money creation”, rather we oppose money laundering, market manipulation, financing of drug runners and terrorists, illegal foreclosures, and, in general, the business model of the “dirty dozen” vampire squids on Wall Street. We certainly do not oppose “private money creation” by our 4500 or so honest banks that finance honest business activity across the USA. We simply oppose the fraudsters and their sycophant, lapdog journalists who do their best to publish glowing, reverential portraits of our Lloyds of Wall Street who “do God’s work”.

Yet our mamas wear Army boots.

Worse, we support ELR, hence, ipso facto,  it must follow that we support a crazy call to end private bank money creation. Where did we advocate such a thing? Can our accusers find one single shred of evidence that we’ve ever promoted such silliness? Of course not. Nor can they show that our moms wear Army boots.

Full disclosure. Stephanie Kelton and I met Congressman Kucinich in his office to discuss employer of last resort. He understood the idea immediately, and said he’d support it. (More full disclosure: he struck me as the smartest representative I had ever met. That is not a back-handed compliment.)

He asked us to outline the ELR program for a bill that he would sponsor. We did. However, he later combined that with a proposal to link the jobs program to a version of a “narrow banking” proposal based on ideas that came out of AMI. We opposed that part of the proposal as unneeded and unworkable. We have never endorsed the bill as it stands.

We advocate a Treasury-financed ELR. There is no need to link that to reform of the financial sector. I do support financial sector reform. I might even support creation of some kind of narrow bank, as part of a full range of private financial institutions to occupy our financial system.

But I have no idea what it would mean to “abolish private money creation”. Anyone can create “private money”. As my dissertation advisor said, the problem is to get it accepted. How can you possibly prevent someone from writing “IOU five bucks”? I do not know how to prevent it, nor would I want to. Preventing “private money creation” would be far more difficult than preventing nose blowing (and no more desirable). I’d never advocate either proscription. There’s a time and a place for private money creation and nose blowing. Maybe both need some supervision. Both serve useful purposes. Banning either is just plain dumb.

But MMT critics do not care about the facts. They do not need citations or any other kind of evidence. It is self-evident. Our mothers wear Army boots.

A journalist ought to try to obtain the facts. And ought to correct errors of reporting. I know that Carney aspires to be a good reporter and I am sure he will investigate to see if MMTers have ever endorsed the Kucinich bill or have ever advocated ridding the world of (honest) private banking. I’m sure that his investigation will demonstrate that is a false claim.

I think he’ll also conclude that opposing criminality among banksters is not equivalent to advocating an end to private banking. He will be able to separate the two, and will join MMTers in supporting Jimmy Stewart banking while pushing for prosecution of, and prison time for, the top management of Wall Street’s crooked banks. He’ll recognize that there is a difference between legitimate “private money creation” and money laundering for global terrorists.

And he’ll come to see that the proper way to fund an ELR program is through Congressional appropriations that run the funding through Treasury—not because “all money+credit creation is already at Treasury” but rather because the sovereign government can, and should, fund job creation on its own balance sheet.

And he’ll check our mother’s footwear before he participates in such ridiculous accusations again.


Kristofer DSeptember 25th, 2013 at 2:09 pm

How I wish that you would pay more attention to the long-term planetary ecological crisis and not take for granted the feasibility and desirability of perpetual economic growth. Then perhaps you would take full-reserve banking seriously for its ecological rationale.

L. Randall Wray L. Randall WraySeptember 25th, 2013 at 2:32 pm

Wow, talk about mixing metaphors! Narrow banks as a way to stop ecological damage. Anyway if you read the masthead description of the GLF blog you will note that it is (mostly) about economics. There are many good ecology blogs. No need for me to duplicate especially since I’m at best an amateur on ecology.

Scott FullwilerSeptember 25th, 2013 at 4:15 pm


Bill Mitchell has written several blogs on environmental sustainability

Mat Forstater, too

Not to mention that I also teach a course on sustainable capital markets in a leading sustainable MBA program. We are not naive to these issues or topics and there's nothing inconsistent between them and full implementation of MMT. In fact, I find MMT to be an indispensable part of that course.

Having said that, we would argue that full reserve banking has nothing to do with sustainability, and indeed, as Randy pointed out, is impossible to actually implement anyway. I've seen all the proposals, but none of them accurately portray how banking really works and all end up being inapplicable, unfortunately.

Kristofer DittmerSeptember 26th, 2013 at 2:21 pm

Thanks for the links, Scott. The dividing line between MMTers like Bill Mitchell, and ecological economists like myself, is the former’s belief that “A fully employed sustainable economy will still require real GDP growth rates of say 2-3 per cent”. Ecological economics (NOT mainstream, environmental economics) argues that the belief that there is anything ecologically sustainable about exponential economic growth is unwarranted techno-optimism. Consequently, ecological economics seeks to understand and mitigate systemic growth imperatives. We believe that there is one in the money supply’s overwhelming character as interest-bearing debt. It may not be as immediately expedient for MMTers to engage with ecological economics as with the conjuncture of neoliberal austerity, but I think it is in the long-term interest of the planet that you do so.

gzibordiSeptember 30th, 2013 at 10:54 am

in terms of "a crazy call to end private bank money creation." from AMI or Positive Money I just came across a video of Kumhof of the "Chicago Plan revisited" discussing with Bernard Liater (I guess you know who he is, former Central Banker in Belgium and also currency fund trader) where Liater endorses the Chicago Plan and they also discuss the MMT Job plan and mention yourself.…. Kumhof says he agrress on the Jobs, but has differences with you on money. Is there a place where you or Mitchell or other MMT discuss the Narrow Banking thing ? The reason I am asking is that I am about to publish a book in Italy wirth a university publisher and Warren was going to write a introduction, me and the other author discussed with Warren in Modena at lunch in June and then I asked about the PositiveMoney stuff and he pointed to me the vertical/horizontal money essay. I always assume Warren knows more than me since I met him May 2012 when I organized his first talk in Italy at a financial market event (not with PaoloBarnard, who afterwards went on to bring Warren again in Italy as you might know). But I also know he has a lot of things to do and he is not a professional economist that spends his time reading everything in the field. So I was going to ask you if there are MMT works that debate or debunk the AMI/PositiveMoney/Richard Werner/Narrow Banking view, In the book I try to summarize the issues around money and debt for the Italian public better than Barnard did, trying to giver a sense that you do not have just evil people and then a few good MMT guys, but actually a large and growing movement that recognizes Money as a key issue, neoclassical/DGSE models as fake (and the top economists as in the payrolls of banks, see "Inside Job"). And then there are differences within this movement so that for instance Victoria Chick and Bernard Liater or Charles Goodhart or even Lord Turner show simpathy and agree with MMT but also seem to give credit to the PositiveMoney crowd And Marc Lavoiee agrees with you, but not 100% it seems. I am trying to show basically that exists a COMMON DENOMINATOR for many people on money things, outside the neoclassical world

I hope to have explained myself, but in this sense I am a bit taken aback when I see for instance ""a crazy call to end private bank money creation." because they seem to be good guys so to speak, and they are getting attention to the right issues and from what I read have also endorsement from people that do not seem crazy such as Werner, Liater, Goodhard, Chick for intstance. Full disclosure: I think very very highly of Warren and by default I assume he is right on techincal money issues, but I have noticed the version of MMT preached in Italy is to narrow and I am trying to give a broader appeal. I am also not new in the field, I spent 3 years in doctoral program in Rome in Econometrics in my youth, I have an MBA from UCLA (1992) and I a full time trader in derivatives and stocks and since Ecomomics is not Physics I had the time to absorb most of the issues. So I also have some opinions, for instance I find Werner stuff on Japan convincing,, but mostly I try in the book to put togheter something like a minimum common denominator on debt, money and banking that is alternative to the orthodox world
So my question is: where is the common ground and where are the differences in your opinion ? (I will ask the same question to Mitchell and Warren, usually I ask him but as I say I get a sense that he does not spend his time reading everything around so I am bothering also you thsi time)